June 28, 2014

Have you been following the news about Obamacare? The Affordable Care Act has receded from the front page, but information about how it’s going keeps coming in — and almost all the news is good. Indeed, health reform has been on a roll ever since March, when it became clear that enrollment would surpass expectations despite the teething problems of the federal website.

What’s interesting about this success story is that it has been accompanied at every step by cries of impending disaster. At this point, by my reckoning, the enemies of health reform are 0 for 6. That is, they made at least six distinct predictions about how Obamacare would fail — every one of which turned out to be wrong.

“To err is human,” wrote Seneca. “To persist is diabolical.” Everyone makes incorrect predictions. But to be that consistently, grossly wrong takes special effort. So what’s this all about?

Many readers won’t be surprised by the answer: It’s about politics and ideology, not analysis. But while this observation isn’t particularly startling, it’s worth pointing out just how completely ideology has trumped evidence in the health policy debate.

And I’m not just talking about the politicians; I’m talking about the wonks. It’s remarkable how many supposed experts on health care made claims about Obamacare that were clearly unsupportable. For example, remember “rate shock”? Last fall, when we got our first information about insurance premiums, conservative health care analysts raced to claim that consumers were facing a huge increase in their expenses. It was obvious, even at the time, that these claims were misleading; we now know that the great majority of Americans buying insurance through the new exchanges are getting coverage quite cheaply.

Or remember claims that young people wouldn’t sign up, so that Obamacare would experience a “death spiral” of surging costs and shrinking enrollment? It’s not happening: a new survey by Gallup finds both that a lot of people have gained insurance through the program and that the age mix of the new enrollees looks pretty good.

What was especially odd about the incessant predictions of health-reform disaster was that we already knew, or should have known, that a program along the lines of the Affordable Care Act was likely to work. Obamacare was closely modeled on Romneycare, which has been working in Massachusetts since 2006, and it bears a strong family resemblance to successful systems abroad, for example in Switzerland. Why should the system have been unworkable for America?

But a firm conviction that the government can’t do anything useful — a dogmatic belief in public-sector incompetence — is now a central part of American conservatism, and the incompetence dogma has evidently made rational analysis of policy issues impossible.

So, the Republicans have an atrocious 0-6 success rate on their predictions of doom regarding the ACA.It will be 0-7 after the employer...

It wasn’t always thus. If you go back two decades, to the last great fight over health reform, conservatives seem to have been relatively clearheaded about the policy prospects, albeit deeply cynical. For example, William Kristol’s famous 1993 memo urging Republicans to kill the Clinton health plan warned explicitly that Clintoncare, if implemented, might well be perceived as successful, which would, in turn, “strike a punishing blow against Republican claims to defend the middle class by restraining government.” So it was crucial to make sure that reform never happened. In effect, Mr. Kristol was telling insiders that tales of government incompetence are something you peddle to voters to get them to support tax cuts and deregulation, not something you necessarily believe yourself.

But that was before conservatives had fully retreated into their own intellectual universe. Fox News didn’t exist yet; policy analysts at right-wing think tanks had often begun their careers in relatively nonpolitical jobs. It was still possible to entertain the notion that reality wasn’t what you wanted it to be.

It’s different now. It’s hard to think of anyone on the American right who even considered the possibility that Obamacare might work, or at any rate who was willing to admit that possibility in public. Instead, even the supposed experts kept peddling improbable tales of looming disaster long after their chance of actually stopping health reform was past, and they peddled these tales not just to the rubes but to each other.

And let’s be clear: While it has been funny watching the right-wing cling to its delusions about health reform, it’s also scary. After all, these people retain considerable ability to engage in policy mischief, and one of these days they may regain the White House. And you really, really don’t want people who reject facts they don’t like in that position. I mean, they might do unthinkable things, like starting a war for no good reason. Oh, wait.

But that was before conservatives had fully retreated into their own intellectual universe. Fox News didn’t exist yet; policy analysts at right-wing think tanks had often begun their careers in relatively nonpolitical jobs. It was still possible to entertain the notion that reality wasn’t what you wanted it to be.

It’s different now. It’s hard to think of anyone on the American right who even considered the possibility that Obamacare might work, or at any rate who was willing to admit that possibility in public. Instead, even the supposed experts kept peddling improbable tales of looming disaster long after their chance of actually stopping health reform was past, and they peddled these tales not just to the rubes but to each other.

And let’s be clear: While it has been funny watching the right-wing cling to its delusions about health reform, it’s also scary. After all, these people retain considerable ability to engage in policy mischief, and one of these days they may regain the White House. And you really, really don’t want people who reject facts they don’t like in that position. I mean, they might do unthinkable things, like starting a war for no good reason. Oh, wait.

June 27, 2014

City Council: Equivocation and Prevarication Are Us; No Lobbyist Left Behind

The San Diego Climate Action Plan calls for an action item to be passed by the City Council in 2014: the plastic bag ban. More than 110 other California Cities and Counties have already passed one. Los Angeles City and County both have bans on plastic bags. San Francisco became the first city in the nation to adopt a ban on plastic shopping bags in April 2007. In February of 2012, the Board of Supervisors voted to expand the ordinance to more stores. Since San Jose’s ban took effect in 2012, plastic-bag litter in storm drains, which can contribute to flooding, has fallen by 89 percent. You know the way, San Jose. Since you raised the minimum wage, unemployment has actually diminished. Take that, job creators. In San Diego County Solana Beach is the only city to enact the ban.

“The objective is to wean ourselves from temporary bags,” said San Diego Councilwoman Sherri Lightner, who shepherded the plastic bag ban ordinance through the Rules and Economic Development Committee, which approved the draft rule last October, eight long months ago. The ban could eliminate 348 million single-use plastic bags from San Diego each year, the Equinox Center estimated in a report that coincided with the committee vote. It could save the city $160,000 per year in bag cleanup costs, preserve precious space at Miramar Landfill and keep plastics out of the ocean, the report concluded.

The Los Angeles County Board of Supervisors has adopted an ordinance banning single use plastic carryout bags at stores in the County unincorporated areas, while requiring they charge 10¢ for each paper carryout bag sold to a customer. The 10-cent charge on paper bags is not subject to State sales tax and will be retained by stores for use in complying with the ordinance.

The intent of the ordinance is to promote the use of reusable bags over single use plastic and paper carryout bags in order to reduce the negative economic and environmental impacts associated with single use bags. This is one of over 70 [Ed. note: now 110] single use plastic carryout bag bans adopted in California alone. And approximately 50 jurisdictions around the country have also adopted carryout bag restrictions. Within Los Angeles County alone, there have been 11 incorporated cities who adopted bag ordinances: Beverly Hills, Calabasas, Culver City, Glendale, Long Beach, Los Angeles, Malibu, Manhattan Beach, Pasadena, Santa Monica, and West Hollywood.

But as with anything else having to do with the City Council, they are experts in diluting, watering down and delaying stuff that the majority of their constituents think it makes sense to do. Look at their equivocating with regard to raising the minmum wage for example. Their first tactic is to water down the amounts. Their second tactic is to delay the implementation. Their third is to phase it in over a number of years. The fourth is to restrict the range of businesses that it applies to.

The same forces are at work with regard to the plastic bag ban. Instead of just saying, Hey the plastic bag ban starts tomorrow - deal with it - they will probably "phase it in" over a number of months, years, decades, because we don't want to inconvenience the job creators who might lay people off if they can't use their beloved plastic, freakin' bags. Then the next thing is that those businesses which have lobbied them to death will be exempted from the plastic bag ban like, for instance, Home Depot. Then it will only apply to grocery stores and supermarkets having a certain amount of revenues. By the time they slice it and dice it, they will have eliminated a few plastic bags without offending the business community which will lobby hard for plastic bag "freedom" - the freedom to use any type of bag they damn well please.

Former Mayor Jerry Sanders will appear on our TV screens representing the San Diego Chamber of Commerce to tell us of the dire, horrorific events that will certainly transpire if we so much as ban one plastic bag. Consumers will go all the way to Poway or Escondido, mind you, because they have not and will not consider a plastic bag ban there. Consumers will go out of their way to get their plastic bag fix. They will not tolerate a paper or reusable bag for their groceries and especially if they have to pay 10 cents for one. Why of all the outrage! First gub'mint is meddling with our freedom to use whatever bag we please, and then they have the audacity, the unmitigated gall, to charge us for it!

And then there are the germophobes who wouldn't consider using a bag more than once for fear that that would be tantamount to contracting some uncurable tropical disease, some disease that antibiotics have lost their power to mitigate. What if their e coli infused chicken dripped or leaked into the canvas? They want their meat wrapped in plastic. Will that be a thing of the past once the plastic bag banners get their way?

They could care less that whales and large birds often swallow plastic carryout bags inadvertently during feeding, which become permanently lodged in their stomachs. So what! There are too many whales and large birds around anyway. Turtles swallow plastic carryout bags since they resemble their main food source, jellyfish. If I want to see a turtle I'll go to the zoo. Don't tell me that we humans have to take a back seat to turtles. Right, Jerry?

And then there's the "gyre", that large patch of pollution in the Pacific Ocean 1000 miles off San Diego's coast that's a virtual garbage dump of plastic where all our plastic bags, bottles and other crap go not to die but to live on in perpetuity. The Chamber of Commerce position would probably be to just tell sailors to avoid that stretch of ocean. Out of sight; out of mind! Work your way around it, guys. Nobody lives there anyway except a bunch of fish. And they're a dime a dozen - before they're caught and processed anyway.

Lawmakers in Sacramento are trying to make California the first state to approve a blanket ban on this most ubiquitous of consumer products - the plastic bag. But their efforts have so far failed twice due to astute lobbying by Hilex Poly, one of the nation’s largest manufacturers of plastic bags. They single-handedly spent more than $1 million lobbying against the bill to ban plastic in California in 2010. That bill failed, as did another attempt in 2013. Hilex Poly, based in Hartsville, S.C., has made political donations to every Democrat in the California Senate who joined Republicans in voting against last year’s bill.

So there you have it. They don't even need to bribe Republicans who are against banning plastic bags just on the face of it. They only need to grease the palms of Democrats who need a little ... persuasion. Give the Democrats some sugar and they will vote your way. Remember, a spoonful of sugar makes the medicine go down.

Mark Daniels, vice president at Hilex Poly, said a ban would cost the state up to 2,000 jobs. Oh those job creators again. We have to cater to them even at the expense of the poor whales and turtles. “This is going to cost Californians millions and millions of dollars,” Mr. Daniels said of the bag banning legislation. “They’re going to have to purchase millions of supposedly reusable bags from China.” Supposedly reusable? Mr. Daniels has a point. How do we really know that a bag made in China is really reusable? It will probably collapse after only a few outings.

California taxpayers on the hook again - this time for millions of dollars worth of reusable plastic bags made in China! What's the matter with the good ole USA for making reusable bags? Consider our balance of payments. A plastic bag ban will ultimately mean that China will take over reusable bag production. We'll lose our sovereignty to a communist - make that state capitalist - nation.

But state Senator Alex Padilla is not giving up.

“It has become increasingly clear to the public the environmental damage that single-use plastic bags have reaped,” said Alex Padilla who is sponsoring yet another round of legislation for a statewide ban. “This is the beginning of the phaseout of single-use plastic bags — period,” he said.

Mr. Padilla’s measure would ban the bags at supermarkets, liquor stores and other locations where they have long existed. Paper bags and more robust, reusable plastic bags will be available for 10 cents, with the goal of forcing shoppers to remember their canvas bags. But after you're liquored up, who can remember to bring that reusable canvas bag? Who cares anyway? C'est la vie!

But in the heartland of the US, controlled by Republicans, the plastic bag aficionados are not giving up. Florida has issued a ban against local municipalities passing bans on plastic bags. Take that California, you liberal oasis. We'll ban your bans.

There has never been a simpler, more easily understood ordinance. It's not rocket science. Don't prevaricate. Don't equivocate. Don't tergiversate. City Council, quit dragging your feet, get your haunches in gear, join 110 other California Cities and Counties and pass the plastic bag ban NOW.

June 22, 2014

A few weeks ago I was visited in my office by the chairman of one of the country’s biggest high-tech firms who wanted to talk about the causes and consequences of widening inequality and the shrinking middle class, and what to do about it.

I asked him why he was concerned. “Because the American middle class is the core of our customer base,” he said. “If they can’t afford our products in the years ahead, we’re in deep trouble.”

I’m hearing the same refrain from a growing number of business leaders.

They see an economic recovery that’s bypassing most Americans. Median hourly and weekly pay dropped over the past year, adjusted for inflation.

Since the depths of the Great Recession in 2009, median real household income has fallen 4.4 percent, according to an analysis by Sentier Research.

These business leaders know the U.S. economy can’t get out of first gear as long as wages are declining. And their own businesses can’t succeed over the long term without a buoyant and growing middle class.

They also recognize a second danger.

Job frustrations are fueling a backlash against trade and immigration. Any hope for immigration reform is now dead in Congress, and further trade-opening agreements are similarly moribund. Yet the economy would be even worse if America secedes into isolationism.

Lloyd Blankfein, CEO of Goldman Sachs, warned recently on “CBS This Morning” that income inequality is “destablilizing” the nation and is “responsible for the divisions in the country.” He went on to say that “too much of the GDP over the last generation has gone to too few of the people.”

Blankfein should know. He pulled in $23 million last year in salary and bonus, a 9.5 percent raise over the year before and his best payday since the Wall Street meltdown. This doesn’t make his point any less valid.

Several of business leaders are suggesting raising the minimum wage and increasing taxes on the wealthy.

Bill Gross, Chairman of Pimco, the largest bond-trading firm in the world, said this week that America needs policies that bring labor and capital back into balance, including a higher minimum wage and higher taxes on the rich.

Gross has noted that developed economies function best when income inequality is minimal.

Several months ago Gross urged his wealthy investors, who benefit the most from a capital-gains tax rate substantially lower than the tax on ordinary income, to support higher taxes on capital gains. “The era of taxing ‘capital’ at lower rates than ‘labor’ should now end,” he stated.

Similar proposals have come from billionaires Warren Buffett and Stanley Druckenmiller, founder of Duquesne Capital Management and one of the top performing hedge fund managers of the past three decades. Buffett has suggested the wealthy pay a minimum tax of 30 percent of their incomes.

The response from the denizens of the right has been predictable: If these gentlemen want to pay more taxes, there’s nothing stopping them.

Which misses the point. These business leaders are arguing for changes in the rules of the game that would make the game fairer for everyone. They acknowledge it’s now dangerously rigged in the favor of people like them.

They know the only way to save capitalism is to make it work for the majority rather than a smaller and smaller minority at the top.

In this respect they resemble the handful of business leaders in the Gilded Age who spearheaded the progressive reforms enacted in the first decade of the twentieth century, or those who joined with Franklin D. Roosevelt to create Social Security, a minimum wage, and the forty-hour workweek during the Depression.

Unfortunately, the voices of these forward-thinking business leaders are being drowned out by backward-lobbying groups like the U.S. Chamber of Commerce that are organized to reflect the views of their lowest common denominator.

And by billionaires like Charles and David Koch, who harbor such deep-seated hatred for government they’re blind to the real dangers capitalism now faces.

Those dangers are a sinking middle class lacking the purchasing power to keep the economy going, and an American public losing faith that the current system will deliver for them and their kids.

America’s real business leaders understand unless or until the middle class regains its footing and its faith, capitalism remains vulnerable.

One of the most recent RoundUp studies suggests it can impact testicular function in just eight days after exposure, meaning the need for precautions and interventions is an urgent one indeed.

The effects of Monsanto’s RoundUp and its key ingredient glyphosate are becoming clearer with time as more research continues to be carried through. But even for years, scientists have suspected it of altering hormone and reproductive function. One of the most recent studies suggests it can impact testicular function in just eight days after exposure, meaning the need for precautions and interventions is an urgent one indeed.

About 20% of young European men have sperm counts below the World Health Organization reference level of 20 m/ml, and 40% have levels below 40 m/ml. Further, semen quality deterioration and fertility issues are also escalating.

“Testicular germ cell cancer (TGC), which has been rising in the last five decades. Congenital malformations of the male reproductive tract, including undescended testes and incomplete fusion of the urethral folds that form the penis. Low testosterone.”

The Institute of Science in Society points to endocrine-disrupting chemical glyphosate as a culprit.

The researchers, led by Prof. Gilles-Eric Seralini from the University of Caen, France, exposed rats to a concentration of just 0.5% RoundUp, similar to the level found in water after a crop is sprayed with the herbicide. They then measured sperm function at 2, 3 and 4 months following exposure.

While there was no difference in concentration, viability, and mobility of the sperm at all three periods, there was an increase in abnormal sperm formation beginning as soon as the 2 month mark.

“Roundup was found to change gene expression in sperm cells, which could alter the balance of the sex hormones androgen and estrogen,” reports GM Watch on the study. “A negative impact on sperm quality was confirmed, raising questions about impaired sperm efficiency. The authors suggested that repeated exposures to Roundup at doses lower than those used in agriculture could damage mammalian reproduction over the long term.”

In the study overview, the authors note, “The repetition of exposures of this herbicide could alter the mammalian reproduction.” A troubling statement, but not one without precedence.

As this report from Dec. 2009 Mother Earth News shows, knowledge about the detrimental effects of RoundUp on reproduction has a history.

“The potential real-life risks from this are infertility, low sperm count, and prostate or testicular cancer. But, ‘Symptoms could be so subtle, they would be easy to overlook,’ says Theo Colborn, president of The Endocrine Disruption Exchange. ‘Timing is of critical importance. If a pregnant woman were to be exposed early in gestation, it looks like these herbicides could have an effect during the sexual differentiation stage. They really lock in on testosterone.’ The bottom line is more research is needed before we can fully understand the effects of glyphosate exposure.”

Research is beginning to catch up and show that RoundUp, its glyphosate, and its creator Monsanto, are all detrimental to our collective health. But will the studies be enough and will they be in time to prevent the large-scale harm that could occur? Now is the time to initiate change to protect all living organisms on the planet.

June 21, 2014

Public Banks are public welfare-oriented institutions and, instead of profit maximisation, their aim is the sustainable development of the real economy within their business territories.

by The Public Banking Forum of Ireland

Public Banks

Public Banks are public welfare-oriented institutions and, instead of profit maximisation, their aim is the sustainable development of the real economy within their business territories. 40% of all Banks in the world are Public Banks mainly in prosperous & emerging countries like Germany, Brazil, Russia, India & China. The BRIC countries have grown 92% in the last decade compared with 15% for the west. The West is now in decline while the BRICs continue to prosper. Less than 10% of all loans granted by our current banking system are given to businesses.

There are basically four models:

The German Savings Bank model,

theCo-op model,

the Japan Post Bank model

& the Bank of North Dakota model.

The German Savings Banks

Founded 1778, have 40% of the total German market and provide 42.7 per cent of all finance to German businesses.

The German Public Savings Banks are

1. Operated on commercial principles with the aim of maximising sustainable lending and not on maximising profits.

2. Operated on the Principle of “Local deposits into local loans” keeping capital in their own area.

3. Surpluses remain with the Bank & within the region: Profits are used to increase equity and for non-profit purposes (the public benefit principle).

4. Banned from engaging in financial speculation.

5. Only allowed to lend only to local people and businesses in its designated catchment area.

In the current recession between 2008 & 2011 German Public Banks increased lending to Small & Medium Size Enterprises (SME’s) by 17%.

Co-op Banks

Founded 1840. “Volksbank” (German for “people’s bank”).There are Volksbank networks in at least ten countries. Germany has 1,099 independent local Volksbanken with 13,211 branches making up 24% of the German banking market.

Japan Post Bank

Postal savings was introduced to Japan in 1875. Japan Post Bank (JPB), now the largest depository bank in the world. Not only is it a convenient place for Japanese citizens to save their money, but the government has succeeded in drawing on JPB’s massive deposit base to fund a major portion of the federal budget. Rather than using its deposits to back commercial loans as most banks do, Japan Post invests them in government securities. That means the government is borrowing from its own bank and its own people rather than from foreign bondholders. The Japanese government can borrow 10-year money at 1 percent and lend it to the U.S. at 1.6 percent (the going rate on U.S. 10-year bonds), making a tidy spread.

Although theoretically privatized in 2007, it has been a political football, and 100 percent of its stock is still owned by the government. To keep the system stable and sustainable, the money just needs to come from the nation’s own government and its own people, and needs to return to the government and people. (Ellen Brown)

The Bank of North Dakota

Established 1919. The BND is similar to a Public Central Bank i.e. creates its own credit. It is a depository for all state tax collections and fees. It pays a competitive rate to the state treasurer. It plows those deposits back into the state of North Dakota in the form of loans. It invests back into the state in economic development type of activities.

What make these types of Public Savings/Lending Institution so successful?

In all cases the profit & the interest on lending is returned to the institution to boost its capital & returned to the community in new loans. This amount of interest can be from a few percent on short term loans to as much as 150% in the case of mortgages. All this is returned to the institution & the community. Under our current system the Interest and profit is taken out of the community & economy. This lack of adequate currency in the economy causes a slow down or a recession.

These Public Institutions also benefit the economy by the type of loan they offer i.e. loans that support SME’s. This is the type of loan that Big Banks will not offer as they do not know their customers and tend to only lend where there is an asset involved they can repossess and sell off if there is a problem with repayment.

This type of lending over the long term does not support the economy or those who create jobs. It just fuel Boom-Bust cycles as was the case with our property bubble.

Why we need it

If we refuse to allow our government to make money through public enterprises, we will be destined to bear the burden of supporting government with our taxes, while we watch countries such as China, Korea and Japan, which do allow public industries, enjoy the fruits of that efficient people-serving arrangement. (Ellen Brown)

How we can get it?

The German Savings Banks, The Sparkassen offer their system. They can be formed as Co-ops or Foundations. We could expand the Post Office service to a Post Bank service.

The 99.2% State owned PTSB is about to be split into a Good & Bad bank and sold off. Why not retain the Good bank and convert its network of 70 odd branches to Public Banks. This alone would be a major start.

Credit Unions that are under threat of being subsumed by bigger CU’s or taken over by banks could convert to Public Banks and retain their ethos.

What are the consequences of not putting a Public Banking system in place?

A public banking system can be put in place at a minimal cost while the cost through Bail-outs or Bail-ins of getting our current banks back to their original state of “not serving the real economy” could be as much as 50bn? 100bn? Who knows? “Ireland Exits Troika Bailout To Prepare For Bail-ins” Reggie Middleton. Michael Noonan passed the Bail-in process into EU law during our EU Presidency.

Ellen Brown, author of the Public Bank Solution, is running for California State Treasurer. The primary election takes place June 3. There are three candidates. Two will advance to the general election. She is running on a platform to establish a public bank for the state of California similar to the one in North Dakota. She has the endorsement of the Green Party – along with Luis Rodriguez for governor and David Curtis for secretary of state. Green Party candidates take no corporate money. Candidates who take corporate money – and that means nearly all conventional candidates – are beholden to large corporate interests and cannot properly represent the interests of the disenfranchised 99%.

A public bank will bring many benefits to California including the fact that interest on outstanding loans will accrue to the taxpayers of the state instead of to private Wall Street banks. State and local finances could be restored by making sure that profits now going to Wall Street will remain at home. Taxes could be lowered, public services expanded. The cost of a college education could be reduced. The cost of borrowing for in state businesses could be lowered thus attracting more businesses to California.

The Bank of North Dakota (BND) earns more than 20% annual return on equity by investing within the state. The BND has earned profits of $300M over 10 years which go into the state treasury. North Dakota had the lowest foreclosure rate in the nation and has had no bank failures in over 20 years. Far from competing with community banks, a public bank of California would backstop local banks making them more creditworthy and capable of making larger loans.

A public bank could control rising credit costs. A year ago, California was rated BBB, barely higher than bankrupt Greece. That means that the state's borrowing costs go up when it has to borrow at market rates from Wall Street. A state owned public bank could keep borrowing costs down because it wouldn't have to charge market rates. This would help municipalities as well.

Today, state and local governments are investing their capital in the form of pension funds as well as depositing their tax revenues on Wall Street. They are handing over their huge credit generating power to the same big banks that got us into the Great Recession and had to be bailed out by the Federal government. They are investing in Wall Street, not Main Street. Wall Street takes the money and gambles with it in the financial casinos loaning out huge amounts to hedge funds, arbitrageurs, high frequency traders and corporate raiders. They are involved in stripmining the economy rather than building up wealth in and for the state of California and its municipalities.

Over 20 towns in the state of Vermont considered a resolution at this year’s town hall meeting on March 4 to direct their legislators to create a state bank for Vermont. The vote does not have legally binding effects; it is only advisory. But it offers an important indicator of public sentiment on legislation being considered. The bills pending before bothhouses of the Vermont state legislature would transfer 10 percent of tax dollars to a publicly held agency, VEDA, the Vermont Economic Development Authority, and would give VEDA a banking license. The proposal would completely transform the way state revenues are used to finance public services.

Wall Street invests states' money in projects that its citizens do not necessarily support like the Keystone pipeline. They do not advance loans to small local businesses because they are more interested in loaning huge amounts of money to hedge funds and private equity groups which use the money to take over profitable companies, get rid of the unionized workers and raid the pensions funds before taking them into bankruptcy.

At the same time, the state borrows the money used for economic development and infrastructure projects from Wall Street investment banks at market rates. Neither of these things would be true if California had a public bank. In 18 states besides Vermont, including California, there are proposals for public banks being considered at the state or the city level. Arizona just chartered a commission to study the issue, and Reading, PA, is in the process of establishing a city public bank.

Another reason to charter a public bank in the state of California is the massive fraud that exists and has existed on Wall Street. In March the FDIC filed a massive 24-count civil suit for damages for LIBOR manipulation against sixteen of the world’s largest banks, including the three largest US banks – JP Morgan Chase, Bank of America and Citigroup. LIBOR (the London Interbank Offering Rate) is the benchmark rate at which banks themselves can borrow. It is a crucial rate involved in over $400 trillion in derivatives called interest-rate swaps, and it is set by the sixteen private megabanks behind closed doors.

No one has yet completely categorized all the outstanding swap deals entered into by local and state governments. But in a sampling of swaps within California, involving ten cities and counties (San Francisco, Corcoran, Los Angeles, Menlo Park, Oakland, Oxnard, Pittsburgh, Richmond, Riverside, and Sacramento), one community college district, one utility district, one transportation authority, and the state itself, the collective tab was $365 million in swap payments annually, with total termination fees exceeding $1 billion.

Omitted from the sample was the University of California system, which alone is reported to have lost tens of millions of dollars on interest-rate swaps. According to an article in the Orange County Register on February 24, 2014, the swaps now cost the university system an estimated $6 million a year. University accountants estimate that the 10-campus system will lose as much as $136 million over the next 34 years if it remains locked into the deals, losses that would be reduced only if interest rates started to rise. No wonder tuition is so high. The money is needed to pay off Wall Street!

The UC’s dilemma is explored in a report titled “Swapping Our Future: How Students and Taxpayers Are Funding Risky UC Borrowing and Wall Street Profits.” The authors, a group called Public Sociologists of Berkeley, say that two factors were responsible for the precipitous decline in interest rates that drove up UC’s relative borrowing costs. One was the move by the Federal Reserve to push interest rates to record lows in order to stabilize the largest banks. The other was the illegal effort by major banks to manipulate LIBOR, which indexes interest rates on most bonds issued by UC.

Why, you might ask, doesn't the University of California do something about their escalating borrowing costs? The answer might be found in the fact that the UC Board of Regents, which controls such decisions, is populated to a great extent by people who already have ties to Wall Street. They include Chief Financial Officer Taylor, who walked through the revolving door from Lehman Brothers, where he was a top banker in Lehman’s municipal finance business in 2007. That was when the bank sold the university a swap related to debt at UCLA that has now become the source of its biggest swap losses. The university hired Taylor for his $400,000-a-year position in 2009, and he has continued to sign contracts for swaps on its behalf ever since.

Several very wealthy, politically powerful men are fixtures on the regent’s investment committee, including Richard C. Blum (Wall Streeter, war contractor, and husband of U.S. Senator Dianne Feinstein), and Paul Wachter (Gov. Arnold Schwarzenegger’s long-time business partner and financial advisor). The probability of conflicts of interest inside this committee—as it moves billions of dollars between public and private companies and investment banks—is enormous.

Blum’s firm, Blum Capital, is also an adviser to CalPERS, the California Public Employees’ Retirement System, which also got caught in the LIBOR-rigging scandal. “Once again,” said CalPERS Chief Investment Officer Joseph Dear of the LIBOR-rigging, “the financial services industry demonstrated that it cannot be trusted to make decisions in the long-term interests of investors.” If the financial services industry cannot be trusted, it needs to be replaced with something that can be trusted like a public bank.

A public bank would not be involved in the Wall Street derivatives casino games. It would make money and return interest on deposits the old fashioned way: by loaning out deposits to local businesses and paying interest on deposits to pension funds, university endowments and other depositors.

A bill to study the feasibility of a public bank of California was introduced by State Senator from Chula Vista, Ben Hueso, in 2011. Hueso was born in San Diego and grew up in Logan Heights. He served on the San Diego City Council, including two years as city council president. The bill he introduced was to establish a commission to study the feasibility of a public bank for the state of California. The following is from Yes magazine:

California is the eighth largest economy in the world, and it has a debt burden to match. The state has outstanding general obligation bonds and revenue bonds of $158 billion, largely incurred for building infrastructure. Over $7 billion of California’s annual budget goes to pay interest on the state’s debt.

As large as California’s liabilities are, they are exceeded by its assets, which are sufficient to capitalize a bank rivaling any in the world. That’s the idea behind Assembly Bill 750, introduced by Assemblyman Ben Hueso of San Diego, which would establish a blue ribbon task force to consider the viability of creating the California Investment Trust, a state-owned bank receiving deposits of state funds. Instead of relying on Wall Street banks for credit—or allowing a Wall Street bank to enjoy the benefits of lending its capital—California may decide to create its own, publicly owned bank.

What California can do with its own bank, other states can do as well, on a scale proportionate to their populations and economies.

On May 2, AB 750 moved out of the Banking and Finance Committee with only one nay vote, and is now on its way to the Appropriations Committee. Three unions—the California Nurses Association, the California Firefighters, and the California Labor Council—submitted their support for the bill. The state bank idea also got a nod from former Secretary of Labor Robert Reich in his speech at the California Democratic Convention in Sacramento the previous day.

The bill was passed by both Houses of Congress only to have Governor Jerry Brown veto it. Later in 2012 Hueso introduced another bill - this time to establish, not just to study the viability of, a public bank of California - Assembly Bill 2500. He later withdrew that bill. The reasons why are not clear.

The larger question is why our state and local governments continue to do business with a corrupt global banking cartel. There is an alternative. They could set up their own publicly-owned banks, on the model of the state-owned Bank of North Dakota. Fraud could be avoided, profits could be recaptured, and interest could become a much-needed source of public revenue. Credit could become a public utility, dispensed as needed to benefit local residents and local economies.

Check out this video presentation by Ellen on why California needs a public bank:

Defense Contractors See Profit Opportunities in War Arising from Global Warming.

Billions for War; Pennies for Peace.

The impact of the US military on climate change is enormous due to its excessive consumption of fuel oil. The US must spread its influence across the oil producing parts of the world in order to protect its supply of oil. The US military consumes huge amounts of oil so that it may preserve strategic access to oil in order to get the oil it needs to preserve strategic access to oil and so on in a never ending loop. Insatiable militarism is the single greatest institutional contributor to the growing natural disasters intensified by global climate change.

The US military is the largest single consumer of energy in the world. If it were a country, the Department of Defense (DoD) would rank 34th in the world in average daily oil use, coming in just behind Iraq and just ahead of Sweden. Within the DoD, the US Air Force is the largest oil consumer. Not only does the military consume a lot of oil, they pay outrageous prices for it. The Pentagon pays an average of $400 to put a gallon of fuel into a combat vehicle or aircraft in Afghanistan. The DoD uses 4.6 billion US gallons of fuel annually, an average of 12.6 million gallons of fuel per day.

Electricity usage by the military, which accounts for even more greenhouse gas emissions, is also gargantuan. In FY 2006, the DoD used almost 30,000 gigawatt hours of electricity at a cost of almost $2.2 billion. The DoD's electricity use would supply enough electricity to power more than 2.6 million average American homes.

In fiscal year 2012, the DoD consumed about a billion gigawatt hours of site delivered energy at a cost of 20.4 billion dollars. While consuming that amount of energy, DoD emitted 70 million metric tons of CO2. And yet, total DoD energy use and costs are even higher simply because the energy use and costs arising from the contractors to support military operations both domestically and abroad are not included in DoD’s data.

Military fuel is more polluting because of the fuel type used for aviation. CO2 emissions from jet fuel per gallon are triple those from diesel and oil. Also, aircraft exhaust has unique polluting effects that contribute in an even greater way to global warming. Among other things jet exhaust includes nitrous oxide, sulfur dioxide, soot and water vapor all of which exacerbate the warming effect of the CO2 exhaust emissions. And the noise pollution of continuous stop and go landings at Miramar Marine Corps Air Station in San Diego is horrific. Residents of nearby Tierra Santa can hardly step outside their door without being bombarded by it. The same holds true for other military air fields across the country.

Even though the DoD is the largest institutional user of petroleum products and energy, the Pentagon has a blanket exemption in all international climate agreements. We are hiding our heads in the sand not to include the military when we talk about climate change. Yet the Kyoto treaty had a loophole big enough to drive a tank through, according to the report A Climate of War - the War in Iraq and Global Warming. After the United States demanded and won exemptions and concessions on the effects of the military on climate change, George W. Bush pulled the United States out of the Kyoto Protocol as one of the first acts of his presidency, alleging it would straitjacket the US economy with too costly greenhouse gas emissions controls.

... [M]ilitarism is the most oil-exhaustive activity on the planet, growing more so with faster, bigger, more fuel-guzzling planes, tanks and naval vessels employed in more intensive air and ground wars. At the outset of the Iraq war in March 2003, the Army estimated it would need more than 40 million gallons of gasoline for three weeks of combat, exceeding the total quantity used by all Allied forces in the four years of World War 1. Among the Army's armamentarium were 2,000 staunch M-1 Abrams tanks fired up for the war and burning 250 gallons of fuel per hour.

The US Air Force (USAF) is the single largest consumer of jet fuel in the world. Fathom, if you can, the astronomical fuel usage of USAF fighter planes: the F-4 Phantom Fighter burns more than 1,600 gallons of jet fuel per hour and peaks at 14,400 gallons per hour at supersonic speeds. The B-52 Stratocruiser, with eight jet engines, guzzles 500 gallons per minute; ten minutes of flight uses as much fuel as the average driver does in one year of driving! A quarter of the world's jet fuel feeds the USAF fleet of flying killing machines; in 2006, they consumed as much fuel as US planes did during the Second World War (1941-1945) - an astounding 2.6 billion gallons.

Coincident with these environmental tragedies which intensify global warming is the ongoing tradeoff in the US federal budget between militarized defense and genuine human and environmental security. The United States contributes more than 30 percent of global warming gases to the atmosphere, generated by five percent of the world's population. At the same time funding for education, energy, environment, social services, housing and new job creation, taken together, is less than the military budget. Former Secretary of Labor Robert Reich has called the military budget a taxpayer-supported jobs program and argues for reprioritizing federal spending on jobs in green energy, education and infrastructure - the real national security.

There is a dangerous feedback loop between war and global warming. Not only is climate change likely to increase conflict, particularly over access to natural resources, but war, in turn, is already accelerating global warming while simultaneously draining our economy of money needed for clean energy.

The increased propensity for war and conflict brought about by global warming is being exploited by the military-industrial complex which is planning on how to profit from it. Defense contractors are looking at climate change as a growth and profit opportunity due to the potential conflicts produced by food and water shortages. They are salivating over the potential profits to be made leading to increased stock market performance and, therefore, higher CEO compensation.

Defense contractors are setting their sights on a narrow minded militarist approach. Indeed, the very companies most responsible for climate change are set to make a killing from its intensification. Just the opposite of the militaristic response to climate change is what is needed, one leading to a meaningful transformation in social relations, cooperation and diplomacy. What the planet needs is increased cooperation among all peoples since we all share the same planet, and we will all suffer the same fate from the effects of global warming. The interests of all earth-citizens coincide for once, but that's not the way military planners see it, and there is little precedent for cooperation on a world scale.

“I think climate change is a real opportunity for the aerospace and defense industry,” said Lord Drayson, then British Minister of State for Strategic Defence Acquisition Reform, in 2009.

One of the world’s largest defense contractors, Raytheon, agrees. In a briefing to the Carbon Disclosure Project last year, the corporation said that “expanded business opportunities will arise” as a result of “security concerns and their possible consequences,” due to the “effects of climate change” both at home and abroad in the form of “storms, droughts, and floods.”

Global warming is creating "business opportunities" for defense contractors. What kind of business opportunities? Raytheon expects to see "demand for its military products and services as security concerns may arise as results of droughts, floods, and storm events ..." Extreme weather conditions could have "destabilizing effects" and that on an international level, "climate change may cause humanitarian disasters, contribute to political violence, and undermine weak governments".

And this, indeed, is the problem: the military-industrial complex views the problems and conflicts created by climate change as opportunities to profit instead of as opportunities to work together with other nations to mitigate and adapt to its effects; instead they are determined to justify innovative new ways to save the profits of the few who run the planet by using conventional military techniques.

Of course if the money used for war were used to build renewable energy generating plants, none of the disaster scenarios might ever happen. But that would not increase military-industrial complex profits. Total US spending on the military could cover all of the global investments in renewable power generation needed between now and 2030 in order to decrease current global warming trends and obviate the necessity for new defense products.

On Memorial Day we celebrated all the old WW II veterans that served their country so proudly and saved the world from fascism. There were Medal of Honor winners and others in snappy colorful uniforms with chestsful of medals strutting around. But where were the Peace Corps veterans? Where were the Peace Corps Medal of Honor winners. Where were their snappy uniforms with chestsful of medals? Sad to say we celebrate war, but we don't celebrate peace. If we cut the military budget by 50% and increased the Peace Corps budget concomitantly, we might just be able to avert global warming and create a world invested in peace rather than war.

The FY 2014 budget for the Peace Corps is $379 million. The military budget for FY 2014 is $820 billion, over 2000 times the Peace Corps budget. Why not increase the Peace Corps budget by a couple of orders of magnitude and decrease the military budget commensurably? We should be celebrating the people that are helping to build water and sewage systems in underdeveloped countries, the people that are helping villagers to build solar and wind power plants, the people that are building hospitals and schools. Nobody is thanking them for their service.

VISTA is the domestic Peace Corps equivalent created by President Lyndon Johnson. Its purpose is to fight poverty in low-income communities by engaging Americans from all walks of life in a year of full-time service. During the Clinton Administration, VISTA was brought under the newly created AmeriCorps program, a division of the Corporation for National and Community Service, and was renamed "AmeriCorps*VISTA." These programs put people to work helping other people in underserved communities focusing on enriching educational programs and vocational training for the nation's underprivileged classes.

For their service participants in these programs receive a number of benefits including a stipend, settling in and transportation costs, child care benefits, and a basic health care plan. Upon completion of their one-year term, VISTA members have the option of receiving a cash award or the Segal AmeriCorps Education Award. It gives otherwise unemployed people a chance to do something positive and constructive as well as helping others to better their lives. Isn't it better to put people to work doing something constructive rather than letting them languish in unemployment where they are likely to become gang members, engage in criminal activities and end up in jail after which they never will be able to get a job for the rest of their life?

Here again the FY 2014 budget for the domestic equivalent of the Peace Corps is a paltry sum - $335.4 million for AmeriCorps State and National Grants, $30.0 million for AmeriCorps NCCC (National Civilian Community Corps) and $92.4 million for AmeriCorps VISTA. America puts its money where its heart is - not in programs that provide and create employment for poor people but on war programs for rich defense contractors and other denizens of the military-industrial complex - those with the riches to hire lobbyists and make campaign donations. And the national jobs program for the poor is to join the Army and become cannon fodder.

As President Obama said recently, "When the only tool you have is a hammer, the solution to every problem looks like a nail." That's precisely the problem with the US militaristic approach to the world's problems: the US acts like every problem has a military solution and that's where we put our money. As Iraq falls apart, the folly of the war there that George W Bush and Dick Cheney lied us into becomes apparent. Those two managed to spend 4 trillion dollars of taxpayers' money, get hundreds of thousands of people killed and maimed, both Americans and Iraqis, and the outcome is a complete destabilization of Iraq and arguably the whole middle east. At the same time their oil fetish and military activities dumped millions of tons of carbon dioxide into the atmosphere. That's quite a legacy: destroying the planet's ecosystem while killing, maiming and wasting taxpayer money!

This insatiable militarism is the single greatest institutional contributor to the growing natural disasters intensified by global climate change.

“Double Irish with a Dutch sandwich,” isn’t actually something you can eat, rather it is depriving the U.S. government of the funds it needs to feed the poor.

Medtronic is as American a company as they come. The surgeon who created its original technology was born and raised in Minnesota, where he lived his entire life. He was educated at a public university there, which is where he eventually conducted his research.

Medtronic’s workforce was educated at American schools. Its products have been carried over American roads and rails for decades. Its medical devices continue to be purchased by American government insurance programs like Medicare and Medicaid, as well as private insurance premiums paid by American workers and their employers.

And if Medtronic’s management has its way, the company will soon become Irish.

Medtronic’s biggest customer is the United States government. How does it expect to get away with a move like that?

Because everybody evades their taxes nowadays – at least in the corporate and billionaire crowd.

Dark Matter

As French economist Gabriel Zucman observes, society has experienced “a profound shift in attitudes” towards taxes since the 1980s. Before then, the behavior of a company like Medtronic – along with General Electric, Starbucks, Walmart, Apple, and dozens of others – would be the source of public embarrassment for its executives. But, as Zucman rightfully observes, Reagan-era anti-government rhetoric soon made it socially acceptable for corporations and extremely wealthy individuals to evade their taxes.

Zucman, a student of the now-famous Thomas Piketty, became curious about the fact that the world’s balance sheets seemed to show more liabilities than assets. As Jacques Leslie wrote in the New York Times, it was “as if the world is in debt to itself.” Something invisible was out there, like economic dark matter warping the global financial universe.

Zucman found his answer: tax havens.

Zucman wrote up his results in a short book called “The Hidden Wealth of Nations,” which quickly became a French bestseller. (The Piketty crowd apparently has a penchant for best-selling books whose names are a play on classic economic titles. See “Capital in the Twenty-First Century.”)

The Lawlessness of Large Numbers

Zucman’s findings were striking. As Leslie puts it, the economist “has put creditable numbers on tax evasion, showing that it’s rampant – and a major driver of wealth inequality.” (A version of the book is here.) Among Zucman’s findings:

The actual corporate tax rate paid for U.S. corporations has dropped from 30 percent to 15 percent since the late 1980s, even though the official tax rate hasn’t changed.

20 percent of all corporate profits in the United States have been moved offshore.

Tax avoidance costs the government one-third of the tax revenue it should be receiving from corporations.

Zucman also found that $7.6 trillion of personal wealth is hidden in tax havens, which amounts to 8 percent of the world’s total personal wealth. He estimates the global tax revenues would increase by more than $200 billion if these tax avoidance practices were ended.

Strikingly, Zucman also disproves the myth that “our country is in hock to China.” If the wealth and tax havens were properly measured Europe would become a creditor, not a debtor, and U.S. indebtedness would be cut in half (from 18 percent of GDP to 9 percent).

Tax havens contain so much wealth that they are distorting the world economy. But they are not for the average man or woman. As Leslie notes, “only multinational corporations and people with at least $50 million in financial assets usually have the resources to engage in offshore tax evasion.”

As a result, this practice does more than just starve governments of needed tax revenue. It also makes the problem of wealth inequality even worse.

Dodgers Win

They’re not necessarily breaking the law, but companies like Apple – and perhaps soon, Medtronic – are certainly cheating. The esteemed Oxford Dictionary defines “cheating” as “gain(ing) an advantage over or deprive of something by using unfair or deceitful methods.”

When these companies use American resources to become American success stories, and then refuse to pay American taxes, that’s unfair. It may not be illegal – at least, not after their highly priced lobbyists game the system for them on the front end while equally high-priced lawyers cover their rear ends. But it’s wrong just the same.

“About 60 percent of multinational corporations’ foreign-source earnings and profits come from countries in which the firms have little business activity, evidence that these MNCs are using tax havens to avoid paying the U.S. corporate income tax.”

Offshore tax dodging can work any number of ways. Here’s one: Imagine that a typical wage earner – me, for example – could take advantage of the tactic Apple uses. I could create a separate “company” for myself, perhaps in Ireland, and then tell the IRS that all of my earnings were being paid in royalties, or usage fees, or other gimmicky charges, to “O’Eskow Inc. of Eire.”

I would pay no U.S. taxes on my earnings until I decided to “repatriate” them back to the United States – although, as a practical matter, most of the money would probably be here anyway, in an “O’Eskow” bank account. This kind of scheme is known in the business as a “Double Irish.”

The Luck of the Corporatish

That’s the Apple scheme made simple. And we haven’t even gotten into the variation of this scheme they call a “Double Irish with a Dutch sandwich,” which is also popular among other Silicon Valley tech companies. That isn’t something you can eat (although it can be used to deprive government of the funds needed to feed the poor).

Medtronic wants to do something slightly different. Right now it’s holding billions of dollars in overseas accounts, much of it presumably as the result of Apple-like moves. Now Medtronic is planning to buy an Irish company with that money and, in a move which is called an “inversion,” make the Irish entity the primary corporation. They win, their country loses.

Not that Medtronic expects to actually move. In fact, the company says it will hire more people in the U.S. (Maybe its senior executives don’t feel like moving.) Medtronic also promises to invest $10 billion in the U.S. over the next ten years.

But then, it implicitly promised not to defraud Medicare, too. And yet it did, paying a $75 million settlement when the fraud was discovered.

The Money Pit

There’s a simple solution to all of this: End tax havens and make corporations pay their fair share. After all, after-tax corporate profits are at or near record highs:

According to a recent report by Citizens for Tax Justice and the Public Interest Research Group, 72 percent of Fortune 500 companies operate subsidiaries in tax-haven jurisdictions. Just 6 percent of Fortune 500 companies account for more than 60 percent of profits reported offshore for tax purposes.

The Government Accountability Office found that large corporations pay an effective federal income tax rate of 12.6 percent – which, when adjusted for money-losing companies, comes out to about 16 percent. (That’s close to the rate Zucman found, and that rate also included smaller companies.) A third of large corporations paid less than 10 percent.

There is overwhelming consensus on this issue. PopulistMajority.org cites a November 2013 poll conducted by Hart Research Associates and Americans for Tax Fairness. The poll showed that 79 percent of Americans want to close offshore tax loopholes, to ensure that American corporations pay as much on foreign profits as they do on U.S. profits.

So why doesn’t the government do that? After all, as the EPI’s Hungerford notes, that would yield a half $1 trillion in new revenue over the next ten years. Why the inaction?

That’s What Friends Are For

First, there’s the issue of that widespread hostility towards government that is so popular nowadays among the wealthy and corporate executives – except, of course, when the government is writing big checks to their corporations.

The media doesn’t help, either. This account of the Medtronic situation, for example, shows how charged language leads the public to misunderstand tax issues. Without correction, the reporter says that Medtronic’s “broader” purpose involves “accessing billions in cash trapped overseas,” which is a demonstrably false assertion. (Although, to be fair, he does place that word in quotes later in the piece.)

Nothing is “trapped” anywhere, of course. Medtronic and its fellow corporations are free to transfer their offshore money at any time. In fact, that would be the ethical thing to do. Instead they spout evasive gibberish. “The combined company should generate significant free cash flow,” said Medtronic CEO Omar Ishrak during an investor call, “which can be deployed with much greater flexibility.”

With so many campaigns to finance, and so many lucrative post-political opportunities out there, this kind of corporation-coddling shouldn’t be a surprise. And it’s not.

No Justification for Inaction

Economist Josh Bivens does a yeoman’s job of refuting the Alice in Wonderland logic of Clinton and other “tax holiday” advocates. The “holiday” crowd claims that reducing the tax burden on already undertaxed corporations will bring in additional revenue. Actually, it will cost the federal government something in the neighborhood of $100 billion over 10 years.

How can we really solve this problem? As the EPI’s Hungerford notes, we can immediately end the deferral of taxes on offshore profits.

We can also follow the lead of the European Commission and dig more deeply into the tax evasion tactics used by companies like Apple and Starbucks. And we can close the offshore tax loopholes which are allowing corporations and their executives to skim the fruits of American resources without paying for them.

Ultimately, as the Los Angeles Times editorial board notes, we will need international cooperation to solve this problem on a global scale. But in the meantime the United States can act swiftly and decisively to close offshore loopholes and tax these corporations appropriately.

A little shame might go a long way, too. As Jacques Leslie writes, “there is no economic, political or moral justification for tax evasion.” The good people of Minnesota who helped Medtronic get started in the 1940s might feel the same way.

Updated to correct the source of the study on the use of tax havens by Fortune 500 companies. It is Citizens for Tax Justice and the Public Interest Research Group.

Richard (RJ) Eskow is a well-known blogger and writer, a former Wall Street executive, an experienced consultant, and a former musician. He has experience in health insurance and economics, occupational health, benefits, risk management, finance, and information technology.

It's not just about the distance between rich and poor, but about the gap between what’s demanded by our planet and what’s demanded by our economy.

Thomas Piketty’s “Capital” is an extremely important contribution to the study of economics and inequality over the last few centuries. But because it fails to address the real limits on growth—namely our ecological crisis—it can’t be a roadmap for the next. (Photo: Dai Luo / Flickr)By now, it’s no secret that French economist Thomas Piketty is one of the world’s leading experts on inequality. His exhaustive, improbably popular opus of economic history—the 700-page Capital in the Twenty-First Century—sat atop the New York Times bestseller list for weeks. Some have called it the most important study of inequality in over 50 years.

Piketty is hardly the first scholar to tackle the linkage of capitalism with inequality. What sets him apart is his relentlessly empirical approach to the subject and his access to never before used data—tax and estate records—that elegantly demonstrates the growing trends of income and wealth inequality. The database he has compiled spans 300 years in 20 different countries.

Exactingly empirical and deeply multidisciplinary, Capital is an extremely important contribution to the study of economics and inequality over the last few centuries. But because it fails to address the real limits on growth—namely our ecological crisis—it can’t be a roadmap for the next.

Inequality and Growth

One of the main culprits of inequality, according to Piketty (and Marx before him), is that investing large amounts of capital is more lucrative than investing large amounts of labor. Returns on capital can be thought of as the payments that go to a small fraction of the population—the investor class—simply for having capital.

"At the center of the rapidly growing New Economy Movement are ecological balance, shared prosperity, and real democracy. If we can’t find a way to build all three, then the only economy worth measuring is the number of days we have left."

In essence, the investor class makes money from money, without contributing to the “real economy.” Piketty demonstrates that after adjusting for inflation, the average global rate of return on capital has been steady, at about 5 percent for the last 300 years (with a few exceptions, such as the World War II years).

The rate of economic growth, on the other hand, has shown a different trend. Before the Industrial Revolution, and for most of our human history, economic growth was about 0.1 percent per year. But during and after the rapid industrialization of the global north, growth increased to a then-staggering 1.5 percent in Western Europe and the United States. By the 1950s and 1970s, growth rates began to accelerate in the rest of the world. While the United States hovered just below 2 percent, Africa’s growth rates caught up with America’s, while rates in Europe and Asia reached upwards of 4 percent.

But as Marx observed in the 19th century, economic growth did little to reduce inequality. In fact, as Piketty demonstrates, wealth has grown ever more concentrated in the hands of the few, even as the pie has gotten bigger. Piketty developed a simple formula to illustrate how wealth gets concentrated: when the average rate of return on capital (r) is greater than the rate of economic growth (g)—in mathematical terms, when r > g.

Through the 19th and early 20th centuries, according to Piketty, the rate of return on capital exceeded that of growth, and inequality blossomed in the industrialized world. But in the 1950s, this trend began to shift—not because of redistributive economic policies, but rather as a consequence of historical calamities in the preceding decades. During this time, aggressive social, economic, and tax policies were ushered in by devastation and destruction.

With these policies set in place, the recovery efforts after the Second World War accelerated growth, which for the first time in recent history exceeded the rate of return on capital—that is, g > r—creating a middle-class.

A Mistaken Model

This was the period when economists and policymakers developed a fetish for economic growth, thanks in part to Simon Kuznets, an influential Belarusian-American economist.

Looking at data spanning from 1913 to 1948, Kuznets concluded—mistakenly, according to Piketty—that in the aggregate, economic growth automatically reduces income inequality. Kuznets argued that a rising tide of industrialization would at first create greater inequality as populations were left behind, but once they began to adapt to the new economic conditions, they would eventually gain access to more wealth as they became fully integrated in the new economic model—in essence closing the wealth gap.

It turns out, though, that the rich just keep getting richer.

This misinterpretation helped justify a quest for perpetual economic growth and free markets, paving the way for massive industrialization, accelerated climate change, and widespread environmental destruction, while simultaneously neglecting the very issue Kuznets set out to address: reducing income inequality.

In Capital, Piketty rigorously applies Kuznets’ analysis to a larger dataset and debunks the argument for perpetual growth. Instead, Piketty concludes that industrialization without any enforceable progressive taxation has actually created greater inequality.

Piketty thus forces liberal and conservative economists alike to rethink their models of growth. But if growth isn’t the answer, what is?

The Limits of Growth

Piketty prescribes a few remedies. But he does not take into serious consideration the limits to growth. He is a traditional Keynesian in this regard, which may be his biggest flaw.

His main prescription—a “progressive tax on global capital”—assumes that a 2-5-percent global growth rate is sustainable in the long run and, with a redistribution of capital, will reduce inequality. However, he concedes that a progressive tax on global capital is utopian. So instead, he’ll settle for a “regional or continental tax” as the first step towards a progressive tax on global capital—starting in the European Union.

Piketty’s solutions focus more on taxing egregious levels of wealth concentration than on the systemic conditions that incentivize the desire to accumulate egregious amounts of capital in the first place. He seems to believe that pushing tax rates high enough will deter CEOs from pursuing millionaire salaries, and that this can be done without hindering growth. The first is unlikely, and the second misses the real problem with growth.

Piketty spends about four pages of his 700-page tome talking around the limits to growth, but he fails to adequately address the fact that limitless growth—i.e., consumption—is completely unsustainable on a finite planet. Recent reports from NASA, the Intergovernmental Panel on Climate Change, and the U.S. government’s National Climate Assessment conclude that the planet cannot continue on the same path of economic growth if it is to sustain human life.

What this means is that it doesn’t matter if we implement a progressive tax on capital because our planet will not sustain forever a growth rate of even 1 percent annually. A dead planet will support neither high earners nor tax collectors.

Towards a New Economy

All this leads to a larger conundrum.

On the one hand, we have extreme inequality, where many live on less than $2 a day while others have so much wealth that it would require several lifetimes to spend. On the other hand, we have a climate crisis that has imposed limits to growth, so we can’t grow our way into shared prosperity.

The traditional approach to inequality is to bring down those at the top while raising up those at the bottom. But to what level should we bring people, considering our finite planet?

Do we want everyone to live a mythical American middle-class lifestyle? Where every family of four lives in a two-car-garage home with a TV in every room, and every family member has a smart phone, tablet, and computer? Where they take a vacation to the other side of the globe once a year, and send their children away to a university and buy them a car when they are of age?

Is this the standard of living we want for every person on the planet? Obviously it can’t be—it would require at least five Earths.

Piketty is right that our political economy favors the growth of inequality, and that inequality in turn poisons our politics. But while we should aspire to create a society that shares its prosperity, we need to address a much bigger gap than the one between rich and poor. We need to address the gap between what’s demanded by our planet and what’s demanded by our economy.

At the center of the rapidly growing New Economy Movement are ecological balance, shared prosperity, and real democracy. If we can’t find a way to build all three, then the only economy worth measuring is the number of days we have left.

Thankfully, the New Economy Movement is seriously considering the four-fold systemic crisis—ecological, economic, social, and political—to identify a just transition to the next system. Piketty can show us part of the problem, but he can’t show us how to solve it on his own.

Noel Ortega is the coordinator of the New Economy Working Group (NEWGroup), which is a partnership between YES! Magazine, the Institute for Policy Studies (IPS), the Business Alliance for Local Living Economies (BALLE), and the People-Centered Development Forum (PCDForum).

"Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling hosts. It is a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership. Who needs an army when you can obtain the usual objective (monetary wealth and asset appropriation) simply by financial means?" — Dr. Michael Hudson, Counterpunch, October 2010

News & Opinion by Ellen Brown

(NATIONAL) -- When the US Federal Reserve bought an 80% stake in American International Group (AIG) in September 2008, the unprecedented $85 billion outlay was justified as necessary to bail out the world’s largest insurance company. Today, however, central banks are on a global corporate buying spree not to bail out bankrupt corporations but simply as an investment, to compensate for the loss of bond income due to record-low interest rates.

Indeed, central banks have become some of the world’s largest stock investors.

This is a rather alarming development. Central banks have the power to create national currencies with accounting entries, and they are traditionally very secretive. We are not allowed to peer into their books.

It took a major lawsuit by Reuters and a congressional investigation to get the Fed to reveal the $16-plus trillion in loans it made to bail out giant banks and corporations after 2008.

What is to stop a foreign bank from simply printing its own currency and trading it on the currency market for dollars, to be invested in the US stock market or US real estate market? What is to stop central banks from printing up money competitively, in a mad rush to own the world’s largest companies?

Apparently not much. Central banks are for the most part unregulated, even by their own governments. As the Federal Reserve observes on its website:

"[The Fed] is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. "

As former Federal Reserve Chairman Alan Greenspan quipped, “Quite frankly it does not matter who is president as far as the Fed is concerned. There are no other agencies that can overrule the action we take.”

The Central Bank Buying Spree

That is how “independent” central banks operate, but it evidently not the US central bank that is gambling in the stock market. After extensive quantitative easing, the Fed has a $4.5 trillion balance sheet; but this sum is accounted for as being invested conservatively in Treasuries and agency debt (although QE may have allowed Wall Street banks to invest the proceeds in the stock market by devious means).

Which central banks, then, are investing in stocks? The biggest player turns out to be the People’s Bank of China (PBoC), the Chinese central bank.

"Evidence of equity-buying by central banks and other public sector investors has emerged from a large-scale survey compiled by Official Monetary and Financial Institutions Forum (OMFIF), a global research and advisory group. The OMFIF research publication Global Public Investor (GPI) 2014, launched on June 17 is the first comprehensive survey of $29.1 trillion worth of investments held by 400 public sector institutions in 162 countries. The report focuses on investments by 157 central banks, 156 public pension funds and 87 sovereign funds, underlines growing similarities among different categories of public entities owning assets equivalent to 40% of world output. The assets of these 400 Global Public Investors comprise $13.2 trillion (including gold) at central banks, $9.4 trillion at public pension funds and $6.5 trillion at sovereign wealth funds."

Public pension funds and sovereign wealth funds are well known to be large holders of shares on international stock markets. But it seems they now have rivals from unexpected sources:

"One is China’s State Administration of Foreign Exchange (SAFE), part of the People’s Bank of China, the biggest overall public sector investor, with $3.9 trillion under management, well ahead of the Bank of Japan and Japan’s Government Pension Investment Fund (GPIF), each with $1.3 trillion.

SAFE’s investments include significant holdings in Europe. The PBoC itself has been directly buying minority equity stakes in important European companies.

Another large public sector equity owner is Swiss National Bank, with $480 billion under management. The Swiss central bank had 15% of its foreign exchange assets – or $72 billion – in equities at the end of 2013."

Public pension funds and sovereign wealth funds invest their pension contributions and exchange reserves earned in foreign trade, which is fair enough. The justification for central banks to be playing the stock market is less obvious. Their stock purchases are justified as compensating for lost revenue caused by sharp drops in interest rates.

But those drops were driven by central banks themselves; and the broad powers delegated to central banks were supposed to be for conducting “monetary policy,” not for generating investment returns. According to the OMFIF, central banks collectively now have $13.2 trillion in assets (including gold). That is nearly 20% of the value of all of the stock markets in the world, which comes to $62 trillion.

From Monetary Policy to Asset Grabs

Central banks are allowed to create money out of nothing in order to conduct the monetary policies necessary to “regulate the value of the currency” and “maintain price stability.”

Traditionally, this has been done with “open market operations,” in which money was either created by the central bank and used to buy federal securities (thereby adding money to the money supply) or federal securities were sold in exchange for currency (shrinking the money supply).

"Quantitative easing” is open market operations on steroids, to the tune of trillions of dollars. But the purpose is allegedly the same—to augment a money supply that shrank by trillions of dollars when the shadow banking system collapsed after 2008.

The purpose is not supposed to be to earn an income for the central bank itself. Indeed, the U.S. central bank is required to return the interest earned on federal securities to the federal government, which paid the interest in the first place.

Further, as noted earlier, it is not the US Federal Reserve that has been massively investing in the stock market. It is the PBoC, which arguably is in a different position than the US Fed. It cannot print dollars or Euros. Rather, it acquires them from local merchants who have earned them legitimately in foreign trade.

However, the PBoC has done nothing to earn these dollars or Euros beyond printing yuan. It trades the yuan for the dollars earned by Chinese sellers, who need local currency to pay their workers and suppliers. The money involved in these transactions has thus doubled.

The merchants have been paid in yuan and the central bank has an equivalent sum in dollars or Euros. That means the Chinese central bank’s holdings are created out of thin air no less than the Federal Reserve’s dollars are.

Battle of the Central Banks?

Western central banks have generally worked this scheme discreetly. Not so much the Chinese, whose blatant gaming of the system points up its flaws for all to see.

Georgetown University historian Professor Carroll Quigley styled himself the librarian of the international bankers. In his 1966 book Tragedy and Hope, he wrote that their aim was “nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.” This system was to be controlled “in a feudalist fashion by the central banks of the world acting in concert by secret agreements,” central banks that “were themselves private corporations.”

It may be the Chinese, not acting in concert, who break up this cartel. The PBoC is no more transparent than the US Fed, but it is not an “independent” central bank. It is a government agency accountable to the Chinese government and acting on its behalf.

The Chinese have evidently figured out the game of the “independent” central bankers, and to be using it to their own advantage.

If the Fed can do quantitative easing, so can the Chinese – and buy up our assets with the proceeds. Owning our corporations rather than our Treasuries helps the Chinese break up US dollar hegemony.

Whatever power plays are going on behind the scenes, it is increasingly clear that they are not serving we-the-people.

The global central banking scheme is systemically flawed and needs to be radically overhauled.

June 15, 2014

More than eight major fires and several smaller brush fires were burning from May 14 to May 17 in San Diego County during an unseasonal heat wave fueled by high Santa Ana winds. Temperature records were set - highs of 97 in San Diego and 104 in both Escondido and El Cajon on May 15. More than a dozen southern California cities broke or tied high temperatures Wednesday, May 14. The high temperature reached 99 in downtown Los Angeles, breaking the old record of 96 set 124 years ago. Airports in Long Beach and Camarillo topped 100 degrees - the warmest since 1981. Wind gusts in hilly areas of San Diego County reached over 100 miles per hour.

On May 17, the Santa Ana winds ceased and temperatures lowered from 98°F into the mid-90s, giving hope to firefighters. On May 18, weather conditions had returned to seasonal normal, with temperatures in the lower 80s and higher humidity. Most of the fires were fully contained at that point, including the Poinsettia Fire, Highway Fire, River Fire, Freeway Fire, Bernardo Fire, and the Tomahawk Fire. The Cocos Fire was extinguished on May 22, leaving only two Camp Pendleton wildfires (the San Mateo and Pulgas fires) still active.

By May 18, the fires had burned more than 27,000 acres (42 sq mi) of land. The three wildfires at Camp Pendleton are estimated to have burned 21,900 acres, which is nearly 18% of the base. More than 55 properties and buildings were damaged or destroyed including 11 houses, an 18-unit apartment complex and two businesses. A badly burned body was found in a transient camp, and one firefighter suffered heat exhaustion. Estimates are that the fire cost close to $60 million, including $29.8 million in destruction or damage to private property, and $27.9 million in the costs of firefighting, support, and environmental damage.

As soon as the Santa Ana winds diminished, the fires were hastily put out. However, there was a sense of dread that drought-sapped vegetation, high temperatures and low humidity portend a long fire season ahead. Santa Anas and wildfire season don't generally start until the fall. Now fire season seems to be all year long. The California Department of Forestry and Fire Protection has responded to more than 1,500 fires so far this year, compared with about 800 during an average year.

"Normally, I don't even put wildfire gear in my vehicle until the end of April. This year I never took it out," Kirk Kushen, battalion chief of the Kern County Fire Department, said at a base camp in Escondido. "We never really completed the 2013 fire season. It's been a continuation."

The first blaze was caused by a spark from construction equipment, according to state officials, but it could take months to get to the bottom of what started the most damaging fires. Alberto Serrato, 57, pleaded not guilty to an arson charge in connection with one of the smaller fires, but authorities say they don't believe he started it, just added brush to it.

"The last three years have been the driest in California's recorded history," Gov. Jerry Brown said, citing climate change as "a factor" in the spate of blazes. 100% of California is experiencing exceptional, extreme or severe drought conditions.

The Santa Ana winds, which are typical for October and November, do not usually occur this time of year, but Cal Fire Assistant Region Chief Thom Porter notes, "we've had this kind of wind ... every month this year." "As a native San Diegan, I have never seen the Santa Ana winds ... in the month of May," San Diego County Supervisor Dianne Jacob said.

Fire season in Southern California typically starts late in the summer and extends into fall. But nowadays, as Jacob points out, "We have year-round fire risk."

Flooding in the Balkans

At exactly the same time span of the San Diego fires, there was massive flooding in the Balkans.

"More than two dozen people are feared dead in Bosnia-Hercegovina and Serbia after the worst floods in more than a century. Tens of thousands have fled their homes as several months of rain fell in a few days and rivers burst their banks. Landslides have buried houses. In one Bosnian town alone, Doboj, the mayor said more than 20 bodies had been taken to the mortuary.

"Observed from the air, almost a third of Bosnia, mostly its north-east corner, resembled a huge muddy lake, with houses, roads and rail lines submerged. According to a spokesman for Bosnia's Security Ministry, about a million people - more than a quarter of the country's population - live in the affected area."

The area got four months worth of rain in a single day. Power and roads were cut off. There were over 2000 landslides in Bosnia alone. Eastern Croatia and southern Romania also experienced flooding, while Austria, Bulgaria, Hungary, Italy, Poland and Slovakia were also affected by the storm.

3.1 million people were affected with 81,879 evacuations. Rain was the heaviest in 120 years of recorded weather measurements. By 20 May, at least 62 people had died as a result of the flooding.

Preliminary assessments of the damage range up to several billions of dollars. Officials in Bosnia stated that the damage could exceed that of the Bosnian War. The events initiated a large international aid campaign, with numerous countries, organizations and individuals donating humanitarian, material and monetary support for the affected areas.

The IPCC notes that extreme rainfall events are expected to become more frequent. As Earth’s atmosphere warms with increasing amounts of greenhouse gases, the amount of water vapor within it increases, weighting the dice toward more substantial downpours even in areas that are expected to become drier in the long term. Every region of the U.S. has seen an increase in heavy downpours with the most recent occurrence coming last month in Florida, when a storm system dumped 10 to 15 inches of rain in the Pensacola area in just 24 hours.

Massive Mudslide in Colorado

On Sunday May 25 there was a mudslide on the Grand Mesa which caused an earthquake that registered 2.8 on the Richter scale, the U.S. Geological Survey office in Golden reported.

"It's an understatement to say that it is massive," Sheriff Stan Hilkey told CNN. "The power behind it was remarkable."

A mudslide, also called a debris flow, is a type of fast-moving landslide that follows a channel, such as a river. Mudslides occur after water rapidly saturates the ground on a slope, such as during a heavy rainfall.

Every year mudslides kill more people than typhoons, hurricanes and cyclones combined.

Right Wingers Take Note

The insurance industry is becoming a true believer in climate change as opposed to the right wing climate change deniers.

Insurance companies are becoming increasingly concerned, and more vocal, about the rising costs of climate change. With large fossil fuel companies reluctant to take greenhouse gas mitigation efforts in the face of potential profit losses, the behemoth insurance industry could provide a counterbalance to the energy industry when it comes to incentivizing near-term emissions cuts, or at least adaptation to the effects of climate change.

“Most insurers, including the reinsurance companies that bear much of the ultimate risk in the industry, have little time for the arguments heard in some right-wing circles that climate change isn’t happening, and are quite comfortable with the scientific consensus that burning fossil fuels is the main culprit of global warming,” reported the New York Times.

San Diego has a flashy new Central Library and it's all paid for without taxpayer funds thanks to local philanthropists. We wrote in another article about the Grand Opening. But that brings up the question: what are we going to do with the old library, a historical landmark, that sits vacant on E Street downtown across from the Post Office.

There have been some suggestions. Interim Mayor Todd Gloria stated: "As soon as we open up that new facility, I want to make sure we have a plan in place for the old facility, and make sure that we put it back into a useful life for the citizens, the taxpayers, and of course the residents of downtown."

Well, the new library opened September 28, 2013, eight long months ago, and there are no plans at this time for doing anything with the old building which is increasingly turning into an eyesore. We are coming up on the one year anniversary, June 9, of the closure of the old library and still there are no plans for it. The longer it remains vacant, the more it might share the same fate as the California Theater, also designated an historical landmark, which is literally rotting away. Nobody wants to put up the money to restore it to its former glory so it just sits there, an eyesore.

You kibitz with the homeless in your campaign ads. Now that you’re Mayor Kevin Faulconer, are you really going to do anything about it? Or are you going to continue to procrastinate. Other cities are ending homelessness from Phoenix to Salt Lake City to Nashville.

You have the model to follow. It’s a no-brainer. You don’t have to reinvent the wheel. Just follow their successful models. You don’t have to continue to study the problem in order to address it ten years from now.

These cities and others have decided that treatment and supportive services should not be conditions or precursors to permanent housing. Instead, the very ability to address personal mental health goals, beat addiction and gain stable employment stems from the safety and stability that comes from having a permanent home. This approach is called Housing First.

Well, K-Faulk, here's your perfect opportunity to put your money where your mouth was. This would be the perfect use for the old building - put all the homeless people that are sleeping outside it ... in it. There's no conflict with the historical designation bit. While historic designation can sometimes be a hindrance to development, Bruce Coons, Executive Director of Save Our Heritage Organization, believes that the building will not have trouble working around any historic constraints. “It can be anything four walls and a roof can be,” he said.

Of course the East Village Residents Group opposes using it as a homeless shelter. But apartments to house the formerly homeless are not exactly the same thing as a homeless shelter. And what else would you expect from the East Village Residents whose primary goal is to get the homeless out of East Village altogether? But, note to the EVRA, a housed formerly homeless person is not a homeless person.

According to Voice of San Diego, the East Village Residents Group recommended the following alternatives:

• An entrepreneurial “startup” innovation center

• Art gallery and exhibition space

• Permanent (or interim) home for the YMCA

• A larger or more attractive space for San Diego colleges like the Art Institute of California, San Diego, John Paul Catholic University and New School of Architecture.

I suppose all these alternatives would mean privatizing what is currently a public asset and selling it off. As apartments for the formerly homeless in accordance with Housing First principles, a public asset could be used to help solve a public problem.

It has also been proposed to use the space as a "neighborhood mixed-use center" in accordance with the San Diego downtown community plan. This would require that a certain percentage of the street level be used for commercial recreation and entertainment such as restaurants, theaters and retail. Just what we need - more unoccupied street level restaurant and retail space in downtown!

And if there are no moral qualms for leaving people to sleep on the street, how about the financial incentives for getting them off the street. It has been found that the homeless consume more tax dollars in emergency services and incarceration costs than they would if the taxpayers just paid for an apartment for them. A study in Florida showed that, when accounting for a variety of public expenses, Florida residents pay $31,065 per chronically homeless person every year they live on the streets vs $10, 051. to house them and pay for treatment.

Most homeless persons, given half a chance, clean up and become productive citizens again as has been attested to by before and after pictures more of which can be found here.

Andrae Bailey, CEO of the commission that released the Florida study, noted that most chronically homeless people have a physical or mental disability, such as post-traumatic stress disorder. “These are not people who are just going to pull themselves up by their bootstraps and get a job,” he said. “They’re never going to get off the streets on their own.” Without some help from society, that is.

What the East Village residents, whose only interest is self-interest, don't understand is that creating permanent housing for the homeless will get them off the streets and make East Village a more salubrious location for residents and visitors alike as well as providing a housing solution for the least fortunate among us. And it's cheaper to provide permanent housing (as opposed to sheltering) and supportive services than it is to leave them on the street and pay for emergency room visits and police services.

June 11, 2014

"Capital in the 21st Century" has sent conservatives into a rage. Here's how to debunk their favorite attacks.

Thomas Piketty’s wildly popular new book, “Capital in the 21st Century,”has been subject to more thinkpieces than the final episode of “Breaking Bad.” Progressives are celebrating the book — and its unexpected popularity — as an important turning point in the fight against global wealth inequality. This, of course, means that conservatives have gone completely ballistic.

Rush Limbaugh, for example, has come out guns a-blazing: “Some French socialist, Marxist, communist economist has published a book, and the left in this country is having orgasms over it,” he exclaimed during a recent broadcast.

When the right drops the C-bomb, the M-bomb and S-bomb all at once, you can be certain a book is having an impact. And “Capital” may well be the “General Theory” of the first half of the 21st century, redefining the way we think about capitalism, democracy and equality.

This, of course, means that the right-wing attacks have only just begun. That in mind, here is a handy guide to navigating the more absurd responses:

Claim: Piketty is a dirty Marxist

There are two Marxes. One, a scholar of capitalism of repute, put forward testable hypotheses, some of which you may accept, some of which you may reject. The other is a conservative boogeyman, the human representation of all they find evil. If they dislike something, it must be Marxist.

Thanks to Piketty, the Left is now having a “Galaxy Quest” moment. All that stuff their Marxist economics professors taught them about the “inherent contradictions” of capitalism and about history’s being on the side of the planners — all the theories that the apparent victory of market capitalism in the last decades of the 20th century seemed to invalidate — well, it’s all true after all.

How to respond: Most times someone drops the M-Bomb, he is intending to be provocative. With enough effort, you can make almost anything Marxist. While Marxists don’t agree on everything, and the term is very nebulous (Marx once said he wouldn’t describe himself as a Marxist), there are some pretty established rules for determining if someone is, indeed, a Marxist. First, he generally doesn’t write things like,

“Marxist analysis emphasized the falling rate of profit — a historical prediction that turned out to be quite wrong” (“Capital in the 21st Century,” page 52)

“Marx usually adopted a fairly anecdotal and unsystematic approach”. (“Capital in the 21st Century,” page 229)

“Marx evidently wrote in great political fervor, which at times lead him to issue hasty pronouncements from which it is difficult to escape. That is why economic theory needs to be rooted in historical sources …” (“Capital in the 21st Century,” page 10)

These are not the words of a Marxist, but rather a reasonable scholar, investigating the truth of the claims written by the greatest political economist who ever lived. The fact that Piketty abstains from the vitriol and misrepresentation that typify most writing on Marx are to his credit.

Piketty certainly does argue that capitalism will not inevitably reduce inequality, as economist Simon Kuznets had famously claimed. As to whether capital will accumulate without end, as Marx believed, he is more nuanced.

Piketty argues that capital will accumulate in the hands of the few when growth is slower than the rate of return on capital and dis-accumulate if not (This is the now famous “r>g” formula). As growth slows, companies can replace workers with machines (written by economists as “substitution between capital and labor”), but only if there is a high elasticity of capital to labor (higher elasticity means easier replacement). This means that the share of income going to the owners of capital will rise, and the distribution of that capital will become more unequal.

Piketty does not hold to a labor theory of value, he does not believe that capitalism is founded on the exploitation of the proletariat, and he does not believe the system will inevitably collapse on its own contradictions. But critics who call Piketty a Marxist don’t actually mean, “Piketty subscribes to a collection of propositions generally accepted by Marxists”; they mean it as a verbal grenade. Step over it and move to more substantive criticisms.

Claim: The social safety net has already solved the problem

In order to somewhat compensate workers for voluntary unemployment and the ludicrously low wages that “markets” pay them, modern societies have developed transfer systems, or social safety nets of various levels of robustness, to bolster the incomes of low-wage workers. Some conservatives argue that these transfers have solved the inequality problem.

Scott Winship, the lovable but irksome economist dedicated to upsetting the inequality consensus, writes in Forbes,

Most importantly, in the United States, most public transfer income is omitted from tax returns. That includes not just means-tested programs for poor families and unemployment benefits, but Social Security. Many retirees in the Piketty-Saez data have tiny incomes because their main source of sustenance is rendered invisible in the data.

How to respond: There’s not enough room to give his data claims a full airing. For our purposes, it suffices to say that, while America does have a transfer system, it’s far less robust than that of other developed nations. (See chart below, from Lane Kenworthy.)

Inequality reduction via taxes and via government transfers, 2000-05

Photo Credit:

Lane Kenworthy

Click to enlarge.

Government revenues are far lower in the U.S. than in other countries, making redistribution more difficult, and thus our safety net is far more frail. (See chart below, from Sean McElwee.)

Revenues as a % of GDP

Photo Credit:

Sean McElwee

Click to enlarge.

Far more interesting is what would happen if conservatives made this their line. After all, if transfers are what is preventing inequality from skyrocketing then the rising share of pre-transfer income accruing to the wealthy capital owners means we need more robust transfer system. Because few, if any, thinkers on the right have argued for a stronger transfer system (and are, in fact, attempting to violate it), they must accept the logical conclusion: Their policies will set off skyrocketing inequality (or, more likely: They don’t give a shit).

Claim: Inequality isn’t a problem because look at consumption!

There are lots of ways to look at inequality. You could look at income inequality by examining how much a person takes home every year from their labor, income from assets and transfers. You could also look at wealth inequality by figuring out how many assets they own, in the form of stocks, bonds, property, and subtract from it their debts. Or you could look at how much they are able to consume.

Some conservative economists argue that an increase in income inequality has not been mirrored by an increase in consumption inequality because the wealthy save or invest their income. Kevin Hassett, a former Romney economic adviser, illustrates this point, arguing:

From 2000 to 2010, consumption has climbed 14% for individuals in the bottom fifth of households, 6% for individuals in the middle fifth, and 14.3% for individuals in the top fifth when we account for changes in U.S. population and the size of households. This despite the dire economy at the end of the decade.

Although he initially made this argument against Piketty in 2012, he has revived it recently in a lecture on the subject.

How to respond:In large part, this is a common trope on the right — the “but they have cellphones!” argument. The empirical literature on this subject is still very much in flux, and there is not a consensus. Some recentstudies find that consumption inequality has increased with income inequality. But even if we except the consumption inequality argument, conservatives have some explaining to do. After all, if income inequality has been rising while consumption inequality has stayed the same, where is the spending coming from? Debt. Which means that wealth inequality is increasing, as the rich save more and the poor fall further into debt. Research released this week by Amy Traub of Demos finds that the recent increase in credit card debt hasn’t been driven by profligate spending, but unemployment, children, the declining value of homes and lack of health insurance. Recent research by Emmanuel Saez and Gabriel Zucman show how the bottom 90 percent simply haven’t been able to save their incomes and thereby build wealth. (See chart below.)

Saving rates by wealth class (decennial averages)

Click to enlarge.

Claim: We need lazy rich people

Tyler Cowen is one of the more honest of Piketty’s critics, and there is certainly a lot to like in his review. However, this section is a head-scratcher:

Piketty fears the stasis and sluggishness of the rentier, but what might appear to be static blocks of wealth have done a great deal to boost dynamic productivity. Piketty’s own book was published by the Belknap Press imprint of Harvard University Press, which received its initial funding in the form of a 1949 bequest from Waldron Phoenix Belknap, Jr., an architect and art historian who inherited a good deal of money from his father, a vice president of Bankers Trust… consider Piketty’s native France, where the scores of artists who relied on bequests or family support to further their careers included painters such as Corot, Delacroix, Courbet, Manet, Degas, Cézanne, Monet, and Toulouse-Lautrec and writers such as Baudelaire, Flaubert, Verlaine, and Proust, among others.

How to respond: It’s very true that in the past, many artists, writers and thinkers benefited from familial wealth (or rich benefactors). This, however, is not to be celebrated! It means that marginalized people are frequently removed from mainstream discussion. It’s also a dreadful defense of inequality. As theologian Reinhold Niebuhr writes,“The fact that culture requires leisure, is however, hardly a sufficient justification for the maintenance of a leisured class. For every artist which the aristocracy has produced, and for every two patrons of the arts, it has supported a thousand wastrels.”

Poverty and oppression can also create other powerful types of art, from boheim to the blues. More important, there are far better ways to fund the arts than throwing money at rich families and hoping they cook up something nice. For instance, the National Endowment for the Arts has funded arts education, dance, design, folk and traditional arts, literature, local arts agencies, media arts, museums, music, musical theater, opera, theater and visual arts. In the aftermath of the Great Depression the Works Progress Administration had an arm devoted to funding the arts that supported Jackson Pollock, William Gropper, Willem de Kooning, Leon Bibel and Ben Shahn. The CIA haseven gotten into the game.

As Niebuhr notes, “An intelligent society will know how to subsidize those who possess peculiar gifts … and will not permit a leisured class to justify itself by producing an occasional creative genius among a multitude of incompetents.” It’s a wonder that conservatives want the wealthy financing art and philosophy — Marx, after all, would have died of penury without the beneficence of the wealthy Engels. Given that his economist friends have been impressed by Piketty’s cultural depth because of his ability to cite Jane Austen, I wouldn’t put much weight on their cultural defense of privilege.

June 03, 2014

NRA's trick is to silence critics by saying politics disdains victims. But Martinez won't be silenced.

May 30, 2014 |

Photo Credit: via youtube

Richard Martinez’s son Christopher was among the six college students murdered last weekend in Isla Vista, California. It’s impossible to fathom the grief that Martinez must be experiencing right now, and the simple fact that he is upright and mobile is an act of tremendous courage. Which is precisely what makes everything else that he has done in the days since he lost his son all the more astounding.

From his first public statement — a blistering and emotional indictment of “craven” politicians who refuse to act on even moderate gun reform — to the tribute to Christopher he delivered Tuesday before a crowd of thousands, Martinez has been willing to show his raw and devastating grief to the world. He has made himself the gnarled and anguished face of our broken system — the lives that it takes and the lives that it ruins. His vulnerability and righteous, focused anger is unlike anything we’ve seen in response to a mass shooting.

And it should scare the shit out of the National Rifle Association, the gun lobby and the cowardly politicians who use these deadly weapons as literal and figurative political props.

It isn’t just the force of Martinez’s emotions or political conviction that make him powerful. He is currently shouldering the unimaginable grief of being yet another parent who has lost yet another child in yet another mass shooting. He has seen this happen before, he knows the political script that’s already playing out. He has listened as gun apologists — time and again — urge the nation not to “politicize” a national tragedy out of respect for the families, and then watched them turn on these same families in order to protect our deadly — and immensely profitable — culture of guns. And he’s using it. All of it.

Days after 26 people were murdered in Newtown, Connecticut, Wayne LaPierredenounced gun reform advocates for “exploit[ing] the tragedy for political gain.” Months later, Sarah Palin echoed the sentiment. ”Leaders are in it for themselves, not for the American people,” she told a crowd that summer, before effectively declaring how proud she was that her son Trig would grow up in a country where men like Elliot Rodger and Adam Lanza can buy guns and hoard ammunition without authorities batting an eyelash.

Martinez may be the single most powerful force we have against this kind of slithering political cowardice. He’s already familiar with the political dirty tricks and knows where the conversation will eventually turn — that the pro-gun crowd is going to come out hard against him, just as they have turned on other parents and survivors. “Right now, there hasn’t been much blowback from the other side,” Martinez noted during a Tuesday interview with MSNBC. “But I anticipate that once my grieving period is over, the gloves will come off. I don’t think it’s going to be easy. They are going to try to do to me the same thing that they’ve done to all of these people. But I have a message for them: My son is dead. There is nothing you could do to me that is worse than that.”

I can’t imagine a more direct rebuttal to the LaPierres and the Palins in this country. To the ridiculous rifle-holding Mitch McConnells and every other ludicrous coward currently walking the halls of Congress and state legislatures across the country. These are the people who — as Martinez has made explicit — are responsible for these terribly predictable and preventable tragedies. Because they have the power to implement sensible reform, but instead stand by and do nothing while more people die every single day.

Martinez also knows that while it’s the public’s job to hold our leadership’s feet to the fire, he’s not the one responsible for having all the answers. “Where’s the leadership on this? We elect these people and we give them power, and it’s just outrageous,” he said during the same interview. “My son just died a few days ago, and you expect me to have the answers to these questions? There are people out there who have the answers. Why isn’t our leadership rounding these people up?”

But Martinez’s grasp of the issue puts most of our elected officials to shame. “When you asked me about solutions, here’s what I’ve learned,” he explained. “This is a complicated issue, but there’s a certain commonality between these events. Typically, all of these incidents involved [...] mental health issues, gun violence and violence against women. These three problems are almost always combined.”

Like other parents whose lives have been upturned by gun violence — women like Lucia McBath, the mother of Jordan Davis, and Sybrina Fulton, the mother of Trayvon Martin — Martinez recognizes and is naming the pattern of violence in the most public way imaginable. But while Congress has so far been wildly successful at shutting down gun reform efforts, parents like Martinez, McBath and Fulton — who are electrifying the national conversation and building solidarity among other families forever changed by rampant access to deadly weapons — may be impossible for them to ignore. They are the most powerful messengers we could ask for.

Martinez is brave, destroyed, weeping, loud, furious and unpredictable in his grief. He is channeling all of that with a singular focus: Change. Or as he said that first day, introducing himself to the world as the grieving but determined father of Christopher Michaels-Martinez: “Not one more.”

“For me to live with this and honor his memory, I will continue to go anywhere and talk to anybody for as long as they want and are willing to listen to me about this problem. I’m not going to shut up,” he said Tuesday. He really seems to mean it.

The very companies most responsible for climate change are set to make a killing from it.

June 1, 2014 |

Photo Credit: Sangoiri / Shutterstock.com

During his speech at West Point Military Academy earlier this week,President Barack Obama described climate change as a "creeping national security crisis" that will require the armed forces to "respond to refugee flows, natural disasters, and conflicts over water and food."

The speech emphasised that US foreign policy in the 21st century is increasingly being honed in recognition of heightened risks of social, political and economic upheaval around the world due the impacts of global warming.

A more detailed insight into US military planning could be seen in the report published a couple of weeks earlier by the Center for Naval Analyses (CNA) Military Advisory Board, written and endorsed by a dozen or so senior retired US generals. Describing climate change as a not just a "threat multiplier," but now - even worse - a "catalyst for conflict", the study concluded that environmental impacts from climate change in coming decades:

".... will aggravate stressors abroad, such as poverty, environmental degradation, political instability and social tensions - conditions that can enable terrorist activity and other forms of violence."

To be sure, the link between climate change and the risk of violence is supported by many independent studies. No wonder, reports NBC News citing various former and active US officials, the Pentagon has long been mapping out strategies "to protect US interests in the aftermath of massive floods, water shortages and famines that are expected to hit and decimate unstable nations."

But the era of climate warfare is not laying in wait, in some far-flung distant future. It has already begun, and it is accelerating - faster than most predicted. Pentagon officials and the CNA's new study point to the Arab Spring upheavals across the Middle East and North Africa as a prime example.

As I've argued previously, violence and unrest in Syria and Egypt can be linked not just to the regional impacts of climate change in terms of water scarcity and food production, but also their complex interconnections with domestic oil and gas scarcity, neoliberal austerity, rampant inequality, endemic corruption, and massive political repression.

Such cases show that climate change in itself does not drive conflict - but the way in which climate change interacts with multiple related factors like declining oil production, food prices, and overlapping political, cultural and economic processes is already generating wild cards that repressive states are ill-equipped to deal with. In that context, such states resort to the thing they do best in an increasingly uncertain world: more repression.

A new study accepted for publication in the July issue of the American Meteorological Society's journal Weather, Climate, and Society, underscores the role of climate change and drought in Syria's ongoing civil war, which by some accounts has taken the lives of over 150,000 people.

The research paper by Dr Peter Gleick demonstrates clearly that the Syrian conflict is not just a climate war, or a resource war, but a water war. Between 2006 and 2011, the country suffered the worst long-term drought and the most severe set of crop failures in recorded history.

This was compounded by water mismanagement and economic deterioration which, in turn, led to further agricultural failures, population dislocations and the migration of rural communities to nearby cities. The resulting combination of urban unemployment, inequality and food insecurity, affecting over a million people, heightened sectarian tensions, and helped spark the social unrest that exploded into conflict.

But the destabilising role of climate change in Syria did not come to light solely with hindsight - US officials were aware for years of the risks. In his paper, Dr Gleick, who is president of the Pacific Institute for Studies in Development, Environment and Security - refers to leaked US diplomatic cables from the US embassy in Damascus to the State Department in Washington DC warning of the implications of the unprecedented drought. In Gleick's words:

"That cable describes a briefing by FAO Syrian Representative Abdullah bin Yehia on drought impacts, which he described as a 'perfect storm' when combined with other economic and social pressure. Concerns expressed at that time also noted that the population displacements 'could act as a multiplier on social and economic pressures already at play and undermine stability in Syria.'"

The response of the US national security apparatus (and that of its poodlish ally Britain) to such warnings is instructive. As I wrote in The Guardian last year, from 2009 through to 2011, US and UK special forces were training "Syrian opposition forces" with a view to elicit the "collapse" of Bashir al-Assad's regime "from within."

While that oil-soaked, blood-drenched geopolitical gamble appears to have failed, the US and regional partner Israel have accommodated themselves to what the New York Times described as a "horrific" status quo that is nevertheless "preferable to either a victory by Mr. Assad's government and his Iranian backers or a strengthening of rebel groups, increasingly dominated by Sunni jihadis." The west, adds America's newspaper of record, "needs more time to prop up opposition forces it finds more palatable."

And this, indeed, is the problem: Viewed through the narrow, self-serving, systematically abused lens of 'national security' (which of course is the noble title of the American intelligence agency responsible for mass surveillance of entire populations), climate change becomes not a springboard for much-need social transformation to save the planet; instead it becomes the beaten-to-death horse justifying innovative new ways to save the profits of the few who run the planet.

Take a look at the CNA's thoughts on climate change and Africa, for instance. Africa is "an increasingly important source of US oil and gas imports," but is "suffering tension and stress resulting from weak governance" and "food and water shortages" to be exacerbated by climate change. The Pentagon's new Africa Command thus "reflects Africa's emerging strategic importance to the US." A "worsening of conditions" due to climate impacts "could prompt further US military engagement."

The securitisation of climate change - and with it the entire planet - is not leading to meaningful transformative action to transform the social relations necessary to mitigate and prevent dangerous global warming. Instead, while climate change accelerates, the corporate-military-industrial complex accelerates profits. Indeed, the very companies most responsible for climate change are set to make a killing from its intensification.

"I think climate change is a real opportunity for the aerospace and defense industry," said Lord Drayson, then British Minister of State for Strategic Defence Acquisition Reform, in 2009.

One of the world's largest defence contractors, Raytheon, agrees. In a briefing to the Carbon Disclosure Project last year, the corporation said that "expanded business opportunities will arise" as a result of "security concerns and their possible consequences," due to the "effects of climate change" both at home and abroad in the form of "storms, droughts, and floods."

This is what happens when one views the world, even with the best of intentions, through the twin lenses of military might and economic clout. We become incapable of recognising that the fundamental obstacle to addressing our global challenges is that we see enemies everywhere.

Climate change can create security risks, but to deal with them seriously, we need to stop projecting and recognise our own hand in the violence we're so terrified of out there.

June 01, 2014

The first quarter of 2014 was another big one for the U.S. solar industry, with 74 percent of all new electricity generation across the country coming from solar power. The 1,330 megawatts of solar photovoltaics (PV) installed last quarter bring the total in the U.S. up to 14.8 gigawatts of installed capacity — enough to power three million homes, according to GTM Research and the Solar Energy Industries Association (SEIA).

In addition to being the largest quarter ever for concentrating solar power, a method of large-scale solar generation that uses a unique ‘salt battery’ to allow the solar plant to keep producing power even when the sun goes down, it was also the first time in the history of SEIA’s reports that residential solar installations surpassed commercial in the same time period. 232 MW of residential PV were installed in the first quarter, compared to 225 MW of commercial solar.

The remarkable growth of rooftop solar across the U.S. is sparking battles in multiple states as customers, utilities, and the solar industry wrestle with how solar customers should be compensated for the excess power they send back to the grid and whether they should be charged additional fees for maintenance and other costs incurred by the utility. And those fights will likely spread, considering more than one-third of the residential PV installations in the first quarter came online without any state incentive, another first.

Solar-friendly policies like incentives are particularly important for ensuring middle class families are able to adopt solar power for their homes. And, as a recent analysis by the Center for American Progress found, it’s middle class families that are driving the rooftop solar revolution in the U.S., with “more than 60 percent of solar installations are occurring in zip codes with median incomes ranging from $40,000 to $90,000.”

This revolution is a threat to utilities’ current business model, since more customers going solar means they’re buying less electricity from the utility. The result in several states has been a push by utilities to scale back incentives or even charge solar customers an additional fee. In Arizona, for instance, Arizona Public Service (APS) has aggressively sought to undercut residential solar and last fall, the state’s energy regulator voted to add what amounts to a $5 per month surcharge on solar customers. The decision was widely viewed as a compromise, particularly considering the considerable amount of money spent by APS and outside groups, several of which were funded by petrochemical billionaires Charles and David Koch.

The fight in Arizona is clearly far from over, however, as a new interpretation of state law could lead to customers who lease their solar panels being forced to pay property taxes on the systems — a move the state’s solar advocates say is again being driven by APS.

In Oklahoma, the possibility of an additional fee being assessed on customers who install their own solar panels or small wind turbines sparked outrage and prompted Gov. Mary Fallin (R) to take the rare step of issuing an executive order emphasizing the importance of renewable energy and equitable implementation of the new legislation.

Even San Antonio’s solar-friendly municipal utility, CPS Energy, shocked solar installers recently by proposing an additional fee on solar customers that would be even larger than Arizona’s. Advocates are currently working to reach a compromise with the utility before the proposal moves to the city council for a vote.

In this various battles, the utilities often claim that solar customers aren’t paying their fair share of costs. But an increase in residential solar not only reduces the amount of electricity coming from polluting sources like coal-fired power plants, it provides a clear value to the utilities that’s often left out when they argue for additional fees. Solar generates during peak hours, when a utility has to provide electricity to more people than at other times during the day and energy costs are at their highest. And solar panels actually feed excess energy back to the grid, helping to alleviate the pressure during peak demand. In addition, because less electricity is being transmitted to customers through transmission lines, it saves utilities on the wear and tear to the lines and cost of replacing them with new ones.